Market: Corn, $ZC_f, ZCU13
Buy or Sell?: Corn futures plunged into option expiration, but we could see a post-expiration bounce from oversold levels.
Range: We suspect corn could be setting up for a retracement that should see around $5.20 and possibly the mid to high $5.30s.
Buy September Corn Calls
Corn futures are down in the dumps, but we think the selling might have been exaggerated by option expiration and sympathy for the soybean fall-out. Although this time of year is seasonally bearish, it seems like the corn market might be due for a 20 to 35 cent bounce from what appear to be dramatically oversold levels. One way to play the upside with limited risk, is to purchase the September corn 520 calls for about 5 cents ($250).
This is what is known as a “flyer” or a lottery ticket, because the trade offers limited risk with unlimited profit potential but requires a substantial move in the market for the position to pay off. If we are right about the bounce, this option could possibly double or triple in value in the coming week or so. If we are wrong, the worst case scenario is a $250 loss plus transaction costs.